Wednesday, September 28, 2011

I wish I could say that this development is in any way surprising, but, well, that's just not true (emphasis mine):

Solar manufacturers including the U.S. unit of SolarWorld AG (SWV) are preparing a trade complaint against imports from China, as they seek help from President Barack Obama to counter subsidies to their competitors, according to people familiar with the matter.

The case, which would be filed at the Department of Commerce and the U.S. International Trade Commission in Washington, would be one of the largest targeting China, with political implications as both nations race to develop clean- energy technologies.

The companies argue that China’s subsidies to solar companies violate global trade rules and provide those manufacturers with an unfair advantage, according to the people, who spoke on condition of anonymity because no complaint has yet been filed....

In the first seven months of this year, China shipped $1.4 billion of solar panels to the U.S., more than the $1.2 billion of panels it sent in all of 2010, according to U.S. International Trade Commission data. Imports from South Korea, the Philippines and India also jumped.

The collapse this month of Solyndra LLC, a California maker of solar panels that had $535 million in U.S. loan guarantees, has renewed demands from lawmakers and union leaders that the Obama administration pursue unfair-trade complaints against China for out-sized subsidies to its clean-energy companies.

“The American solar industry is facing unparalleled challenges, and without the leadership of your administration this industry may disappear,” Senator Ron Wyden, an Oregon Democrat, said in a Sept. 8 letter urging Obama to initiate a countervailing duty case against imports from China or to file a case at the World Trade Organization.

China provided $30 billion in credit to its biggest solar manufacturers last year, about 20 times the U.S. effort, Jonathan Silver, executive director of the Energy Department’s loan program, told a congressional panel Sept. 14...

There are two obvious reasons why this news is anything but shocking for anyone who reads this blog:

First, because many world governments, including the US and China, have spent tons of taxpayer money"invested" heavily in green technology manufacturers and banked on exports as part of their economic recovery strategies, I've long predicted - and subsequently reported on - an inevitable spike of domestic and multilateral (WTO) trade disputes over illegal subsidies to "green energy" companies.

Second, a trade dispute was particularly inevitable in the case of solar panels because of (i) the very public struggles of not just the scandal-plagued Solyndra, but also several other domestic solar technology manufacturers and (ii) the very public blame for these failures that domestic unions, manufacturers and the Obama administration have placed on China. Heck, I (incorrectly) predicted such a dispute just last week. (Guess I was just a little too psychic... or something.)

That said, the (possible) case is still pretty astonishing for one reason: its blatant chutzpah. As alluded to above, the US solar industry, including the aforementioned Solyndra, has received BILLIONS of their own subsidies from the US government. Under the Department of Energy Loan Program alone (which has dispersed a total of $38.6 billion and countingin subsidies), the following solar companies have received buckets of taxpayer money:

By my (admittedly lawyer-esque) math, that's about $16 billion in total or partial loan guarantees (read: subsidies) to the solar industry as part of the DOE loan program alone. I'm not sure where Mr. Silver's getting his numbers, but they definitely seem low (shocking, I know). And those DOE loans are definitely not the only subsidies out there: according to the United Steelworkers Union's 2010 "Section 301" petition requesting a WTO complaint against China's solar industry subsidies, the United States government had doled out more than $100 billion in subsidies to the US solar industry. And that was back in 2010, so the number's certainly even higher now.

So, for the direct and indirect recipients of all of this sweet, sweet government cash to turn around and complain about their competitors receiving - yep - sweet, sweet government cash is pretty much the height of hypocrisy. Or, as I stated back in 2010 regarding the USW complaint:

Obvious translation [of the union complaint]: Sure American manufacturers received $100 billion worth of green subsidies in order to crush their foreign competitors, but China's producers received lots more, and theirs have been far more effective! No fair! In essence, the USW is openly complaining that the Chinese are better cheaters than we are, and the union thus wants the US government to call in the WTO's referees in order to stop China's cheating. Talk about chutzpah.

Exit question: if USTR ends up filing a WTO dispute on the USW's grounds, does that mean we'll have our first ever official case of "subsidy envy"?

The answer to that cheesy question was clearly "yes," and the solar industry's, ahem, green envy obviously hasn't subsided since then (nor has my cheesy sense of humor). And, as the DOE's recent statements make clear, the industry's Blame China strategy appears to have very vocal and eager supporters in certain parts of the Obama administration. Perfect.

Furthermore, and as if this all weren't sketchy enough, the Bloomberg article points other things that should cause us all to question the solar industry's little ol' Blame China plan. Most importantly, the article shows that solar imports from other countries are also on the rise, so even if the US industry's new anti-subsidy petition against Chinese is successful, the most likely result - along with, obviously, higher solar panel prices for US consumers - isn't the resurgence of US solar manufacturers but instead the very common "trade diversion" (i.e., a simple shift in imports from China to these other low-cost suppliers). So we'll all pay more, and no new net jobs will be created. Sweet.

In a similar vein, the fact that a German-owned company with plants all over the world (and which has just cut 200 jobs in California) is leading the US anti-subsidy charge against only Chinese imports should definitely give us pause. As Cato's Dan Ikenson has explained repeatedly, US-based companies with major foreign operations have often used US trade remedies actions to cripple their foreign competition and bolster their own import sources, rather than to increase domestic output and employment. I have no idea if that's what SolarWorld or any other members of the US industry are up to, but it's definitely something to keep in mind.

So to recap: the highly-subsidized and seriously-struggling US solar panel industry - led by a German-owned manufacturer with global sourcing operations - is targeting highly-subsidized Chinese solar panel imports which, along with imports from several other non-targeted countries, have surged in the last few years.

Welcome to the Green Subsidy Game, folks. Be sure to grab a good seat; the show's just getting started.